Water fight: Mining billionaires battle for prized port

All roads might lead to Rome, but in the iron ore rich state of Western Australia, the railways that generate much of the wealth lead to port.

And it’s that latter infrastructure, specifically the port at Port Hedland that services iron ore operations in the Pilbara, that is believed to be the key reason behind the interest of WA billionaires Andrew “Twiggy” Forrest and Gina Rinehart in the struggling junior iron ore miner Atlas Iron.

Mr Forrest’s Fortescue Metals Group confirmed it had acquired 19.9 per cent of Atlas last week. And on Wednesday, Mrs Rinehart’s Hancock Prospecting confirmed it had acquired a 19.96 per cent “aggregate beneficial and economic interest” in Atlas.

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Both have stopped just short of hitting the 20 per cent threshold that would compel them to make a bid for all of Atlas’ shares.

In other developments on Wednesday, Atlas went into a trading halt which could remain in place until Friday. The company asked for the trading halt pending an announcement it will make, in relation to correspondence from the WA transport minister regarding a port project at Port Hedland.

In the 29-minute period in which Atlas stock was traded, 141.35 million shares changed hands. The stock rose 4.8 per cent to 4.4 cents before trading halted.

So why would two of WA’s richest, most influential and successful business people suddenly become so interested in a struggling iron ore miner?

Fortescue Metals Group chairman Andrew Forrest.Credit:TREVOR COLLENS

After all Atlas is a company that two months ago the boss of Mineral Resources, Chris Ellison, reportedly described as “sitting in palliative care” with “a finite life”.

Mr Ellison, himself a wealthy and very successful businessman, had of course just launched a bid to buy Atlas, a move that was effectively blocked by Fortescue’s shock move.

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At one point a market darling, Atlas became so unloved in recent years that its stock price, according to Bloomberg, has not closed above five cents in the past three years. At one point it traded below one cent per share.

According to a well-placed source, a likely explanation behind the enthusiasm of Fortescue and Hancock Prospecting for Atlas is port access.

“I don’t think any one of those guys, perhaps other than MinRes, really has that much interest in the underlying resource base in iron ore of Atlas Iron, it’s all about the port,” the source said.

The port’s become a lot more efficient over especially the last decade, and been proven to hold a fair amount of latent capacity.

Mining industry source

And a key here, according to the source, is the stake that Atlas holds in a joint-venture project, now paused, called North West Infrastructure. This project (NWI) is in addition to existing capacity Atlas has at the port.

Atlas is a partner in NWI, which according to UBS has plans to develop a new port facility at Port Hedland with capacity to export 50 million tonnes per year, from the South West Creek location.

“I think that gets to the heart of why MinRes, FMG and now Hancock would look to somehow control the distribution of those rights, or in fact just take them over,” the source said.

Gina Rinehart has bought a 19.96 per cent stake in Atlas.Credit:Bloomberg

“The port’s become a lot more efficient over especially the last decade and been proven to hold a fair amount of latent capacity. And I think ultimately that’s what everyone’s now scrambling to try and secure. Whatever capacity is left in the channel is basically what they’re after,” the source said.

Asked if either of FMG or Hancock Prospecting might want to take over Atlas, or simply maintain the status quo, the source said: “If you wanted to maintain the status quo you don’t need to own Atlas. If I had to guess I’d say that they’re looking for a seat at the table, on the assumption that there’s a subdivision of what might be Atlas’ rights (at the port). If I had to guess I’d say that’s what it’s all about.”

Shares in Mineral Resources were down 89 cents, or 5.2 per cent, to close at $16.40 on Wednesday, while shares in Fortescue dropped 9 cents, or 1.9 per cent, to close at $4.55.